Cosmetics company L'Occitane en Provence must decide if it is the right time to go public, and, if so, where to list. The firm could list on Euronext in Paris, close to the firm's headquarters in southern France, on one of the large exchanges in the United States, or perhaps in Asia, where much of the firm's future growth is expected. The case provides opportunities to discuss the benefits and costs of going public, including valuation implications, and illustrates the choices faced by a prospective public firm that operates in a global setting.
Authors :: Bo Becker, Daniela Beyersdorfer, E. Scott Mayfield, Mayuka Yamazaki
Swot Analysis of "L'Occitane en Provence" written by Bo Becker, Daniela Beyersdorfer, E. Scott Mayfield, Mayuka Yamazaki includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that L'occitane Provence facing as an external strategic factors. Some of the topics covered in L'Occitane en Provence case study are - Strategic Management Strategies, IPO, Sales and Finance & Accounting.
Some of the macro environment factors that can be used to understand the L'Occitane en Provence casestudy better are - – increasing household debt because of falling income levels, increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization,
increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of L'Occitane en Provence
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in L'Occitane en Provence case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the L'occitane Provence, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which L'occitane Provence operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of L'Occitane en Provence can be done for the following purposes –
1. Strategic planning using facts provided in L'Occitane en Provence case study
2. Improving business portfolio management of L'occitane Provence
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of L'occitane Provence
Strengths L'Occitane en Provence | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of L'occitane Provence in L'Occitane en Provence Harvard Business Review case study are -
Sustainable margins compare to other players in Finance & Accounting industry
– L'Occitane en Provence firm has clearly differentiated products in the market place. This has enabled L'occitane Provence to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped L'occitane Provence to invest into research and development (R&D) and innovation.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For L'occitane Provence digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. L'occitane Provence has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Operational resilience
– The operational resilience strategy in the L'Occitane en Provence Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Strong track record of project management
– L'occitane Provence is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of L'occitane Provence
– The covid-19 pandemic has put organizational resilience at the centre of everthing that L'occitane Provence does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Analytics focus
– L'occitane Provence is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Bo Becker, Daniela Beyersdorfer, E. Scott Mayfield, Mayuka Yamazaki can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Diverse revenue streams
– L'occitane Provence is present in almost all the verticals within the industry. This has provided firm in L'Occitane en Provence case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Innovation driven organization
– L'occitane Provence is one of the most innovative firm in sector. Manager in L'Occitane en Provence Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Training and development
– L'occitane Provence has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in L'Occitane en Provence Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Low bargaining power of suppliers
– Suppliers of L'occitane Provence in the sector have low bargaining power. L'Occitane en Provence has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps L'occitane Provence to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– L'occitane Provence has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study L'Occitane en Provence - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- L'occitane Provence is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at L'occitane Provence is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in L'Occitane en Provence Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Weaknesses L'Occitane en Provence | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of L'Occitane en Provence are -
Lack of clear differentiation of L'occitane Provence products
– To increase the profitability and margins on the products, L'occitane Provence needs to provide more differentiated products than what it is currently offering in the marketplace.
Products dominated business model
– Even though L'occitane Provence has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - L'Occitane en Provence should strive to include more intangible value offerings along with its core products and services.
Aligning sales with marketing
– It come across in the case study L'Occitane en Provence that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case L'Occitane en Provence can leverage the sales team experience to cultivate customer relationships as L'occitane Provence is planning to shift buying processes online.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study L'Occitane en Provence, in the dynamic environment L'occitane Provence has struggled to respond to the nimble upstart competition. L'occitane Provence has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of L'occitane Provence supply chain. Even after few cautionary changes mentioned in the HBR case study - L'Occitane en Provence, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left L'occitane Provence vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of L'occitane Provence is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. L'occitane Provence needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help L'occitane Provence to focus more on services rather than just following the product oriented approach.
Slow decision making process
– As mentioned earlier in the report, L'occitane Provence has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. L'occitane Provence even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Low market penetration in new markets
– Outside its home market of L'occitane Provence, firm in the HBR case study L'Occitane en Provence needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Capital Spending Reduction
– Even during the low interest decade, L'occitane Provence has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Interest costs
– Compare to the competition, L'occitane Provence has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High cash cycle compare to competitors
L'occitane Provence has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Opportunities L'Occitane en Provence | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study L'Occitane en Provence are -
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help L'occitane Provence to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. L'occitane Provence can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Leveraging digital technologies
– L'occitane Provence can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, L'occitane Provence is facing challenges because of the dominance of functional experts in the organization. L'Occitane en Provence case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Loyalty marketing
– L'occitane Provence has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects L'occitane Provence can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of L'occitane Provence has opened avenues for new revenue streams for the organization in the industry. This can help L'occitane Provence to build a more holistic ecosystem as suggested in the L'Occitane en Provence case study. L'occitane Provence can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, L'occitane Provence can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Developing new processes and practices
– L'occitane Provence can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Manufacturing automation
– L'occitane Provence can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Buying journey improvements
– L'occitane Provence can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. L'Occitane en Provence suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Lowering marketing communication costs
– 5G expansion will open new opportunities for L'occitane Provence in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, L'occitane Provence can use these opportunities to build new business models that can help the communities that L'occitane Provence operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Threats L'Occitane en Provence External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study L'Occitane en Provence are -
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Consumer confidence and its impact on L'occitane Provence demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, L'occitane Provence can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study L'Occitane en Provence .
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of L'occitane Provence business can come under increasing regulations regarding data privacy, data security, etc.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Environmental challenges
– L'occitane Provence needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. L'occitane Provence can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. L'occitane Provence needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents L'occitane Provence with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology acceleration in Forth Industrial Revolution
– L'occitane Provence has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, L'occitane Provence needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Stagnating economy with rate increase
– L'occitane Provence can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Increasing wage structure of L'occitane Provence
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of L'occitane Provence.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for L'occitane Provence in the Finance & Accounting sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for L'occitane Provence in the Finance & Accounting industry. The Finance & Accounting industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Weighted SWOT Analysis of L'Occitane en Provence Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study L'Occitane en Provence needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study L'Occitane en Provence is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study L'Occitane en Provence is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of L'Occitane en Provence is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that L'occitane Provence needs to make to build a sustainable competitive advantage.